Stock (Symbol) |
Ecolab (ECL) |
Stock Price |
$110 |
Sector |
| Food & Necessities |
Data is as of |
| June 20, 2016 |
Expected to Report |
| Jul 26 – Aug 1 |
Company Description |
 Ecolab Inc. provides water, hygiene and energy technologies and services. Operating segments include Global Industrial, Global Institutional, Global Energy and Other. The Company’s Global Industrial segment consists of the Water, Food and Beverage, Paper and Textile Care operating units. Global Institutional segment consists of the Institutional, Specialty and Healthcare operating units. The Global Energy segment provides on-site, technology-driven solutions to the global drilling, oil and gas production, refining, and petrochemical industries. Other segment consists of the pest elimination and equipment care operating units. The Company’s cleaning and sanitizing programs and products, pest elimination services and equipment maintenance and repair services support customers in the food service, food & beverage processing, hospitality, healthcare, Government & education, retail, textile care & commercial facilities in 170 countries. Source: Thomson Financial |
Sharek’s Take |
 Ecolab (ECL) is up from around $100 in January/February to around $120 now even though profit growth has basically been flat. Why the solid move higher without the fundamentals backing it? Because investors know F/X is the reason for the lackluster growth. Last qtr the company had -4% profit growth but if it wasn’t for foreign exchange profit growth would have been 10%. Although profits look to grow just 2% in 2016, analysts see profit growth accelerating to 13% in 2017. Ecolab was also working against a retracting Energy market (30% of sales) but now oil has also rallied, and drillers in the U.S and Canada are coming back online. Ecolab was founded in 1923 as Economics Laboratory. Its 1st product was Absorbit which cleaned carpets on the spot and eliminated the need for hotels to be shut down to be cleaned. The company went public in 1957 then changed its name to Ecolab in 1986, and has increased its dividend each year since. Over the years Ecolab expanded exponentially and now serves the following industries: (1) Food and beverage manufacturing plants, (2) Water purifying plants, (3) Housekeeping, (4) Food retailers & supermarkets, (5) Hospitals & healthcare facilities, (6) Power plants & oil refineries and (7) Pest elimination. The company has 1500 scientists and 6000 patents who continue to innovate and create new and better products to offer. This is a quality, conservative stock. In ECL’s annual reports management gives ten years of financial data which match figures I got from other sources. The Estimated Long Term Growth Rate is 12% and the company pays a 1% dividend which has increased every year since 1986. Also, Bill Gates owns 10% of the shares out. The only negative other than current profit growth is ECL’s P/E is 27 which is high historically. |
One Year Chart |
 Last qtr Ecolab had -4% profit growth on -6% sales growth as both were affected by the strong USD. The company beat estimates by around a penny but 2016 estimates fell by 2 cents to $4.45. Profit Estimates for the next 4 qtrs are 0%, 2%, 7% and then 16%. So profit growth doesn’t look to get back into the double-digits until the qtr ending March 30th. And with a P/E of 27 ECL is high, considering. |
Fair Value |
 Because profit growth is slow right now my current Fair Value on this stock is 21x earnings, which is $93. I will move the fair P/E higher once double-digit growth returns. |
Bottom Line |
 Ecolab is an outstanding stock for conservative investors searching for double-digit growth. But ECL even though profits went up each year the past decade, investors haven’t gotten steady stock growth throughout the years. Notice in the chart the stock has periods where its based for a while before making a move higher. Since profit growth is currently flat and the P/E is high I doubt the stock can break out and make a move. In fact I think the stock has already priced in next year’s gains. ECL is ranked 34th of 38 stocks in the Conservative Portfolio Power Rankings. |
Power Rankings |
Growth Stock Portfolio
N/AAggressive Growth Portfolio N/AConservative Stock Portfolio 30 of 34 |
